Hallador Energy Company Reports First Quarter 2024 Financial and Operating Results

TERRE HAUTE, Ind., May 06, 2024 (GLOBE NEWSWIRE) — Hallador Energy Company (NASDAQ – HNRG) reported a net loss of $1.7 million, $(0.05) basic earnings per share, operating cash flow of $16.4 million, and adjusted EBITDA of $6.8 million for the quarter ended March 31, 2024.

Brent Bilsland, President and Chief Executive Officer, stated, “Throughout the first quarter, we continued our progress on transitioning the focus of Hallador from a coal production company to an independent power producer. During the first three months of 2024, our Electric Operation’s revenue exceeded that of our Coal Operation’s revenue. Additionally, we were successful in adding approximately $138.0 million in forward energy and capacity sales, growing our Electric Operation’s forward sales book to approximately $657.0 million and total contracted forward sales capacity, energy and coal through 2029 to $1.5 billion (on a segment basis). In support of our expectation that Hallador Power sales will continue to exceed our traditional Sunrise Coal subsidiary, we anticipate changing Hallador’s SIC code to 4911 (electric services) from 1220 (bituminous coal producer) in the future.”

Below are highlights for the first quarter of 2024:

  • The Company Generated $16.4 Million in Operating Cash Flow Which We Utilized to Pay Down Bank Debt by $14.5 million.
    • As of March 31, 2024, our bank debt was $77.0 million, bringing our liquidity to $39.5 million and our leverage ratio to 1.58X, within our covenant of 2.25X.
  • We Continued to Make Progress in our Transition from a Coal Production Company to an Independent Power Producer.
    • Our Electric Operation’s revenue exceeded our Coal Operation’s revenue for the first three months of 2024.
    • Since January 1, 2024, we secured approximately $138.0 million in new long-term capacity and energy contracts.
  • We Restructured Our Coal Division to Increase Margins and Adjust to Current Market Conditions.
    • As previously announced, the restructuring should reduce capital expenditures at the Oaktown Mining Complex by $10.0 million.
    • Maintains up to 4.5 million tons of annual production of our highest margin coal. Mining costs for the quarter were $53.38 per ton. However, at Oaktown, we saw mining costs in March decrease into the $30’s on a per ton basis.
    • Reduced employee headcount by 110.
    • Idled production at our highest cost surface mines.
  • We Launched a Targeted Request for Proposals for Power Demand Supporting New Development at our Merom Power Plant. Proposals are Due in Mid-May.
    • Allows us to potentially capture additional margins above our traditional wholesale energy markets.
    • Allows us to market industrial users of power, such as data centers, AI providers and power dense manufacturers, to the Merom property.
    • We believe utilizing our power plant to help supply these large users of energy with reliable, resilient electricity, should allow us to operate more efficiently in a volatile power environment, generate increased margins and support the fragile power grid as it navigates the challenges of transition to new sources of energy in the coming decades.

Solid Forward Sales Position – Segment Basis, Before Intercompany Eliminations (unaudited):

    2024     2025     2026     2027     2028     2029     Total  
Power                                                        
Energy                                                        
Contracted MWh (in millions)     1.60       1.90       1.83       1.78       1.09       0.27       8.47  
Contracted price per MWh   $ 37.02     $ 36.06     $ 55.37     $ 54.65     $ 52.98     $ 51.00          
Contracted revenue (in millions)   $ 59.23     $ 68.51     $ 101.33     $ 97.28     $ 57.75     $ 13.77     $ 397.87  
% Energy Sold*     27 %     32 %     31 %     30 %     18 %     5 %        
                                                         
Capacity                                                        
Average monthly contracted capacity     818       801       744       623       454       100          
% Capacity Contracted**     106 %     82 %     77 %     64 %     47 %     10 %        
Average contracted capacity price per MWd   $ 209     $ 198     $ 230     $ 226     $ 225     $ 230          
Contracted capacity revenue (in millions)   $ 47.01     $ 57.89     $ 62.46     $ 51.39     $ 37.39     $ 3.47     $ 259.61  
                                                         
Total Energy & Capacity Revenue                                                        
Contracted Power Revenue (in millions)   $ 106.24     $ 126.40     $ 163.79     $ 148.67     $ 95.14     $ 17.24     $ 657.48  
Contracted Power Revenue per MWh*   $ 44.39     $ 47.76     $ 68.96     $ 68.00     $ 66.31     $ 56.62          
                                                         
2024 average cost per MWh was $31.88 for the three months ended March 31, 2024 ($30.41 assuming intercompany sales of coal were sold at cost)                                                        
                                                         
2024 Power Capex Budget (in millions) excluding ELG requirements   $ 18.00                                                  
                                                         
Coal                                                        
Priced tons – 3rd party (in millions)     2.48       1.78       0.50       0.50                   5.26  
Average price per ton – 3rd party   $ 50.65     $ 50.04     $ 55.50     $ 55.50     $     $          
Priced tons (in millions) – Hallador Power     1.20       2.30       2.30       2.30       2.30             10.40  
Average price per ton – Hallador Power   $ 51.00     $ 51.00     $ 51.00     $ 51.00     $ 51.00     $          
Contracted coal revenue (in millions)   $ 186.81     $ 206.37     $ 145.05     $ 145.05     $ 117.30     $     $ 800.58  
% Priced     82 %     91 %     62 %     62 %     51 %     0 %        
                                                         
Committed & unpriced tons (in millions) – 3rd party           1.00       1.00       1.00                   3.00  
Committed & unpriced tons (in millions) – Hallador Power                                          
Total contracted tons (in millions)     3.68       5.08       3.80       3.80       2.30             18.66  
                                                         
% Coal Sold*     82 %     113 %     84 %     84 %     51 %     0 %        
                                                         
Average cost per ton of coal was $53.38 for the three months ended March 31, 2024                                                        
                                                         
2024 Coal Capex Budget (in millions)   $ 25.00                                                  
                                                         
TOTAL CONTRACTED REVENUE (IN MILLIONS)   $ 293.05     $ 332.77     $ 308.84     $ 293.72     $ 212.44     $ 17.24     $ 1,458.06  
 
*Based on coal production of 4.5 million tons and 6.0 million MWh annually.
 
**Based on a MISO accreditation of 769 MW per day through 2024, up to 971 MW per day for 2025. Accreditations are adjusted annually based on 3-year rolling performance metrics.
 

The unaudited table below represents some of our critical metrics (in thousands, except for per-ton data):

    Three Months Ended  
    March 31,  
    2024     2023  
Net income (loss)   $ (1,696 )   $ 22,051  
Total Revenues   $ 109,672     $ 188,334  
Tons Sold (after elimination)     892       1,693  
Average Price per Ton (after elimination)   $ 55.64     $ 55.88  
Tons Sold (before elimination)     1,214       1,693  
Average Price per Ton (before elimination)   $ 54.40     $ 55.88  
Bank Debt   $ 77,000     $ 75,200  
Operating Cash Flow   $ 16,369     $ 26,112  
Adjusted EBITDA*   $ 6,823     $ 34,015  
_______________
* Non-GAAP financial measure, defined as operating cash flowsless effects of certain subsidiary and equity method investment activity, plus bankinterest, less effects of working capital period changes, plus other amortization
 

Adjusted EBITDA should not be considered an alternative to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Our method of computing Adjusted EBITDA may not be the same method used to compute similar measures reported by other companies.

Management believes the non-GAAP financial measure, Adjusted EBITDA, is an important measure in analyzing our liquidity and is a key component of certain material covenants contained within our Credit Agreement, specifically a maximum leverage ratio and a debt service coverage ratio. Noncompliance with the leverage ratio or debt service coverage ratio covenants could result in our lenders requiring the Company to immediately repay all amounts borrowed. If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the assessment of our liquidity. The required amount of Adjusted EBITDA is a variable based on our debt outstanding and/or required debt payments at the time of the quarterly calculation based on a rolling prior 12-month period.

Reconciliation of the non-GAAP financial measure, Adjusted EBITDA, to cash provided by operating activities, the most comparable GAAP measure, is as follows (in thousands) for the quarters ended March 31, 2024 and 2023, respectively.

Reconciliation of GAAP “Cash provided by (used in) operating activities” to non-GAAP “Adjusted EBITDA” (in thousands; unaudited)

    Three Months Ended  
    March 31,  
    2024     2023  
Cash provided by (used in) operating activities   $ 16,369     $ 26,112  
Current income tax expense           432  
Loss from Hourglass Sands     1       1  
Loss from Sunrise Indemnity     6        
Distribution from Sunrise Energy           (625 )
Bank and convertible note interest expense     3,533       2,687  
Working capital period changes     (13,175 )     4,812  
Other long-term asset and liability changes     (937 )     (451 )
Cash paid on asset retirement obligation reclamation     639       365  
ASC 606 Capacity Adjustment     (1,248 )      
Other amortization     1,635       682  
Adjusted EBITDA     6,823       34,015  
                 
Cash used in investing activities     (14,850 )     (13,467 )
                 
Cash used in financing activities     (2,270 )     (12,722 )
                 

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act). Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such asexpects,” “believes,” “intends,” “anticipates,” “plans,” “estimates,” “guidance,” “target,” “potential,” “possible,orprobableor statements that certain actions, events or resultsmay,” “will,” “should,orcouldbe taken, occur or be achieved. Forward-looking statements are based on current expectations and assumptions and analyses made by Hallador and its management in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in Hallador’s annual report on Form 10-K for the year ended December 31, 2023, and other Securities and Exchange Commission filings. Hallador undertakes no obligation to revise or update publicly any forward-looking statements except as required by law.

Conference Call

The call will be on Tuesday, May 7, 2024, at 2:00 pm Eastern time and will be webcast live on our website at www.halladorenergy.com under events and will be available for a limited time.

PARTICIPANT INFORMATION
United States (Local): +1 404 975 4839
United States (Toll-Free): +1 833 470 1428
Access Code: 749324

Hallador is headquartered in Terre Haute, Indiana, and through its wholly-owned subsidiaries, Sunrise Coal, LLC and Hallador Power, LLC, produces coal and electricity in the Illinois Basin for the electric power generation industry. To learn more about Hallador, visit our website at www.halladorenergy.com.

CONTACT: INVESTOR RELATIONS
PHONE: (303) 839-5504

 

Hallador Energy Company
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
 
    March 31,     December 31,  
    2024     2023  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 1,635     $ 2,842  
Restricted cash     4,737       4,281  
Accounts receivable     14,228       19,937  
Inventory     29,688       23,075  
Parts and supplies     40,360       38,877  
Prepaid expenses     2,614       2,262  
Total current assets     93,262       91,274  
Property, plant and equipment:                
Land and mineral rights     115,486       115,486  
Buildings and equipment     537,921       537,131  
Mine development     161,669       158,642  
Finance lease right-of-use assets     16,178       12,346  
Total property, plant and equipment     831,254       823,605  
Less – accumulated depreciation, depletion and amortization     (348,783 )     (334,971 )
Total property, plant and equipment, net     482,471       488,634  
Investment in Sunrise Energy     2,562       2,811  
Other assets     7,125       7,061  
Total assets   $ 585,420     $ 589,780  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Current portion of bank debt, net   $ 24,438     $ 24,438  
Notes payable – related party     5,000        
Accounts payable and accrued liabilities     47,125       62,908  
Current portion of lease financing     4,958       3,933  
Deferred revenue     41,242       23,062  
Contract liability – power purchase agreement and capacity payment reduction     41,662       43,254  
Total current liabilities     164,425       157,595  
Long-term liabilities:                
Bank debt, net     49,343       63,453  
Convertible notes payable     10,000       10,000  
Convertible notes payable – related party     1,000       9,000  
Long-term lease financing     9,701       8,157  
Deferred revenue     5,434        
Deferred income taxes     8,625       9,235  
Asset retirement obligations     14,934       14,538  
Contract liability – power purchase agreement     36,229       47,425  
Other     1,871       1,789  
Total long-term liabilities     137,137       163,597  
Total liabilities     301,562       321,192  
Commitments and contingencies                
Stockholders’ equity:                
Preferred stock, $.10 par value, 10,000 shares authorized; none issued            
Common stock, $.01 par value, 100,000 shares authorized; 36,534 and 34,052 issued and outstanding, as of March 31, 2024 and December 31, 2023, respectively     365       341  
Additional paid-in capital     144,490       127,548  
Retained earnings     139,003       140,699  
Total stockholders’ equity     283,858       268,588  
Total liabilities and stockholders’ equity   $ 585,420     $ 589,780  
Hallador Energy Company
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
    Three Months Ended March 31,  
    2024     2023  
SALES AND OPERATING REVENUES:                
Electric sales   $ 58,755     $ 92,392  
Coal sales     49,630       94,602  
Other revenues     1,287       1,340  
Total sales and operating revenues     109,672       188,334  
EXPENSES:                
Operating expenses     85,083       133,521  
Depreciation, depletion and amortization     15,443       17,976  
Asset retirement obligations accretion     399       451  
Exploration costs     70       206  
General and administrative     5,944       6,947  
Total operating expenses     106,939       159,101  
                 
INCOME FROM OPERATIONS     2,733       29,233  
                 
Interest expense (1)     (3,937 )     (3,899 )
Loss on extinguishment of debt     (853 )      
Equity method investment (loss) income     (249 )     69  
NET INCOME (LOSS) BEFORE INCOME TAXES     (2,306 )     25,403  
                 
INCOME TAX EXPENSE (BENEFIT):                
Current           432  
Deferred     (610 )     2,920  
Total income tax expense (benefit)     (610 )     3,352  
                 
NET INCOME (LOSS)   $ (1,696 )   $ 22,051  
                 
NET INCOME (LOSS) PER SHARE:                
Basic   $ (0.05 )   $ 0.67  
Diluted   $ (0.05 )   $ 0.61  
                 
WEIGHTED AVERAGE SHARES OUTSTANDING                
Basic     34,816       32,983  
Diluted     34,816       36,740  
                 
(1) Interest Expense:                
Interest on bank debt   $ 2,805     $ 2,255  
Other interest     728       432  
Amortization:                
Amortization of debt issuance costs     404       1,212  
Total amortization     404       1,212  
Total interest expense   $ 3,937     $ 3,899  
Hallador Energy Company
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
    Three Months Ended March 31,  
    2024     2023  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income (loss)   $ (1,696 )   $ 22,051  
Adjustments to reconcile net income to net cash provided by operating activities:                
Deferred income taxes     (610 )     2,920  
Equity loss (income) – Sunrise Energy     249       (69 )
Cash distribution – Sunrise Energy           625  
Depreciation, depletion, and amortization     15,443       17,976  
Loss on extinguishment of debt     853        
Loss (gain) on sale of assets     (24 )     21  
Amortization of debt issuance costs     404       1,212  
Asset retirement obligations accretion     399       451  
Cash paid on asset retirement obligation reclamation     (639 )     (365 )
Stock-based compensation     666       1,220  
Amortization of contract asset and contract liabilities     (12,788 )     (15,569 )
Other     937       451  
Change in operating assets and liabilities:                
Accounts receivable     5,709       (3,269 )
Inventory     (6,613 )     (4,004 )
Parts and supplies     (1,483 )     (2,926 )
Prepaid expenses     (37 )     389  
Accounts payable and accrued liabilities     (8,015 )     2,009  
Deferred revenue     23,614       2,989  
Net cash provided by operating activities     16,369       26,112  
CASH FLOWS FROM INVESTING ACTIVITIES:                
Capital expenditures     (14,874 )     (13,482 )
Proceeds from sale of equipment     24       15  
Net cash used in investing activities     (14,850 )     (13,467 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
Payments on bank debt     (26,500 )     (27,013 )
Payments on lease financing     (1,238 )      
Borrowings of bank debt     12,000       17,000  
Proceeds from sale and leaseback arrangement     1,927        
Issuance of related party notes payable     5,000        
Debt issuance costs     (38 )     (1,600 )
ATM offering     6,580        
Taxes paid on vesting of RSUs     (1 )     (1,109 )
Net cash used in financing activities     (2,270 )     (12,722 )
Decrease in cash, cash equivalents, and restricted cash     (751 )     (77 )
Cash, cash equivalents, and restricted cash, beginning of period     7,123       6,426  
Cash, cash equivalents, and restricted cash, end of period   $ 6,372     $ 6,349  
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:                
Cash and cash equivalents   $ 1,635     $ 2,441  
Restricted cash     4,737       3,908  
    $ 6,372     $ 6,349  
SUPPLEMENTAL CASH FLOW INFORMATION:                
Cash paid for interest   $ 3,083     $ 3,116  
SUPPLEMENTAL NON-CASH FLOW INFORMATION:                
Change in capital expenditures included in accounts payable and prepaid expense   $ (5,290 )   $ 120  
Stock issued on redemption of convertible notes and interest   $ 9,721     $  

 

Hallador Energy Company
Condensed Consolidated Statements of StockholdersEquity
(in thousands)
(unaudited)
 
                    Additional             Total  
    Common Stock Issued     Paid-in     Retained     Stockholders’  
    Shares     Amount     Capital     Earnings     Equity  
Balance, December 31, 2023     34,052     $ 341     $ 127,548     $ 140,699     $ 268,588  
Stock-based compensation                 666             666  
Stock issued on vesting of RSUs     321       3       (3 )            
Taxes paid on vesting of RSUs     (132 )     (1 )                 (1 )
Stock issued on redemption of convertible notes     1,582       15       9,706             9,721  
Stock issued in ATM offering     711       7       6,573             6,580  
Net loss                       (1,696 )     (1,696 )
Balance, March 31, 2024     36,534     $ 365     $ 144,490     $ 139,003     $ 283,858  
                    Additional             Total  
    Common Stock Issued     Paid-in     Retained     Stockholders’  
    Shares     Amount     Capital     Earnings     Equity  
Balance, December 31, 2022     32,983     $ 330     $ 118,788     $ 95,906     $ 215,024  
Stock-based compensation                 1,220             1,220  
Stock issued on vesting of RSUs     275       3       (3 )            
Taxes paid on vesting of RSUs     (121 )     (1 )     (1,108 )           (1,109 )
Net income                       22,051       22,051  
Balance, March 31, 2023     33,137     $ 332     $ 118,897     $ 117,957     $ 237,186  


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